Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 77-40

1977-1 C.B. 248

Section 1002
Section 1234
Section 7805

Full Text

Rev. Rul. 77-40

Rev. Rul. 72-198, 1972-1 C.B. 223, holds, in part, that a corporation that has issued warrants for the purchase of its stock recognizes ordinary income upon the lapse of such warrants in an amount equal to the fair market value of the consideration it received in exchange for the warrants.

Further consideration has been given to Rev. Rul. 72-198, and it has been determined that under the authority contained in section 7805(b) of the Internal Revenue Code of 1954, the holding of Rev. Rul. 72-198 described above will not be applied to warrants issued on or prior to April 24, 1972, the date of publication of the Revenue Ruling.

Accordingly, if on or prior to April 24, 1972, a corporation issued warrants to purchase its stock, no tax consequences will result to the issuing corporation as a result of the expiration of the warrants.

Rev. Rul. 72-198 is modified.